The housing market recovery is in full swing led by multifamily developments and the rental sector in particular. Single-family home building is also on the rise with a growth rate of over 20 percent from 2012 to 2014; however multifamily construction has increased 43 percent. This rise in construction is answering a demand by young singles, couples and families looking for affordable rental units.
Growth in the Rental Sector
Condos, single-family homes, and apartments all comprise the residential market, but the rental sector is growing faster than home purchases. While nearly four out of ten rental properties are single-family homes, and another fifth are in small buildings with two to four units, larger multifamily communities of 10 or more units account for the majority of rentals at 30 percent.
Growth in condominium construction and home purchases are up over past years, but first time home buyers are still choosing to rent rather than buy. Construction census data cites new units built for “rental purposes,” leased at a rate of 92 percent in the last two years in buildings with five or more units. A large portion of those units are one-bedroom apartments which account for 42 percent of units built in 2014.
Affordable Rental Housing in Demand
Millennials are choosing to rent for longer periods of time, and are moving to larger metro areas where jobs are more easily found. They can afford to find smaller rental units on their salaries, but are leery of committing to long-term mortgage agreements. The average American has a student loan balance of $29,000 following graduation, and for many this debt balance impacts their chances of qualifying for a mortgage loan. Additionally, a staggering 86% of college seniors do not have a secure job lined up post-graduation, making it difficult to pay for daily necessities, let alone achieve the status of single-family home ownership.
While the goal still remains moving into a single-family home, young families are continuing to rent until they are more financially secure. Rent burdens are rising, according to the Harvard Joint Center for Housing Studies, leading to Millennials spending about 50 percent of their income on housing.
And although they are looking for affordable rental prices, they’re also looking for high-end finishes like granite countertops and stainless steel appliances. To appeal to this new generation of renters, developers are opting for materials that give off a high-end feel without the additional cost. Materials such as formica, vinyl composition tile, and laminate flooring easily achieve the look of pricey materials such as granite, natural stone, and hardwood flooring. Updates like fresh paint and modern lighting fixtures are also small ways developers can deliver a high-end look while keeping the project economical. Developers are also attracting tenants by designing high-tech buildings with customizable spaces and social environments. Some properties play music in common spaces, design the building with conservation in mind, or include electric-car charging stations in the parking area.
Multifamily Rental Buildings
According to the Census Bureau, the number of multifamily units in buildings with 50 or more apartments grew to 48 percent in 2014. The construction industry has been steadily growing the number of large multifamily buildings to keep up with the demand for housing.
At Live Oak Contracting we understand the market trends and know how to maximize returns for our clients. Contact our main office for more information or view our current and recently completed projects.
Image source: USNews.com
